Proposed Exemptions; Hospital Supplies, Inc. Pension Plan, et al.

Federal RegisterJan 4, 1995

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DEPARTMENT OF LABOR

[Application No. D-9727, et al.]

Proposed Exemptions; Hospital Supplies, Inc. Pension Plan, et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the

Department of Labor (the Department) of proposed exemptions from

certain of the prohibited transaction restriction of the Employee

Retirement income Security Act of 1974 (the Act) and/or the Internal

Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

All interested persons are invited to submit written comments or

request for a hearing on the pending exemptions, unless otherwise

stated in the Notice of Proposed Exemption, within 45 days from the

date of publication of this Federal Register Notice. Comments and

request for a hearing should state: (1) the name, address, and

telephone number of the person making the comment or request, and (2)

the nature of the person's interest in the exemption and the manner in

which the person would be adversely affected by the exemption. A

request for a hearing must also state the issues to be addressed and

include a general description of the evidence to be presented at the

hearing. A request for a hearing must also state the issues to be

addressed and include a general description of the evidence to be

presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least

three copies) should be sent to the Pension and Welfare Benefits

Administration, Office of Exemption Determinations, Room N-5649, U.S.

Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.

20210. Attention: Application No. stated in each Notice of Proposed

Exemption. The applications for exemption and the comments received

will be available for public inspection in the Public Documents Room of

Pension and Welfare Benefits Administration, U.S. Department of Labor,

Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.

Notice to Interested Persons

Notice of the proposed exemptions will be provided to all

interested persons in the manner agreed upon by the applicant and the

Department within 15 days of the date of publication in the Federal

exemption as published in the Federal Register and shall inform

interested persons of their right to comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in

applications filed pursuant to section 408(a) of the Act and/or section

4975(c)(2) of the Code, and in accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).

Effective December 31, 1978, section 102 of Reorganization Plan No. 4

of 1978 (43 FR 47713, October 17, 1978) transferred the authority of

the Secretary of the Treasury to issue exemptions of the type requested

to the Secretary of Labor. Therefore, these notices of proposed

exemption are issued solely by the Department.

The applications contain representations with regard to the

proposed exemptions which are summarized below. Interested persons are

referred to the applications on file with the Department for a complete

statement of the facts and representations.

Hospital Supplies, Inc. Pension Plan (the Plan) Located in Radnor,

Pennsylvania; Proposed Exemption

[Application No. D-9727]

The Department is considering granting an exemption under the

authority of section 4975(c)(2) of the Code and in accordance with the

procedures set forth in 29 C.F.R. Part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990.) If the exemption is granted, the sanctions

resulting from the application of section 4975 of the Code, by reason

of section 4975(c)(1)(A) through (E) of the Code, shall not apply to

the proposed cash sale of two adjacent parcels of real property (the

Properties) by the Plan to Armond J. Civera, Jr. (Mr. Civera)1, a

disqualified person with respect to the Plan, provided that the

following conditions are satisfied:

\1\Because Mr. Civera is the only participant in the Plan and

the Employer is wholly owned by Mr. Civera there is no jurisdiction

with respect to the Plan under Title I of the Act pursuant to CFR

2510.3-3(b) and (c). However, there is jurisdiction under Title II

of the Act pursuant to section 4975 of the Code.

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(a) the proposed sale will be a one-time cash transaction;

(b) the Plan will receive for each Property the current fair market

value established at the time of the sale by an independent qualified

appraiser;

Summary of Facts and Representations

1. The Plan is a defined benefit pension plan with one participant,

Mr. Civera, who is also the trustee of the Plan and the owner of the

Plan sponsor. Mr. Civera is a sole participant of the Plan. As of

December 31, 1993, the Plan's assets were $594,061.63.2 The Plan

sponsor is a Pennsylvania corporation which provides consulting

services to the medical industry and to the print technology industry

(the Employer).

\2\In this regard, the Plan's financial statement lists the

aggregate value of the Properties as $485,000.

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2. In October 1989, the Plan acquired a 100 percent interest in a

single family residence built on a 1.17 acres of land, which is located

at 1128 King of Prussia Road, Tredyffrin Township, Pennsylvania

(Property 1). The total purchase price of Property 1, including related

closing costs, was $170,000. In March 1993, the Plan also allocated

approximately $60,000 for certain structural improvements for Property

1. This construction work was done by companies that have no

relationship to the Plan and the Employer. It is represented that

Property 1 was purchased from Roseanne Koczicki, who has no

relationship to the Plan and the Employer. In March 1993, the Plan

acquired a 100 percent interest in a 1.026 acre parcel of vacant land

(Property 2), which is adjacent to Property 1. The total purchase price

of Property 2, including related closing [[Page 487]] costs, was

$77,500. Subsequently, the Plan expended approximately $47,500 for

improvements associated with the subdivision of Property 2. These

improvements were done by entities that have no relationship to the

Plan and the Employer. It is represented that Property 2 was purchased

from Tom and Beth Nojunas, who also have no relationship to the Plan

and the Employer. It is represented that neither Property is adjacent

to any other properties owned by disqualified persons, and that neither

Property has ever been used by a disqualified person. Furthermore,

neither of the Properties are encumbered by any debt.

3. It is represented that Mr. Civera, in his trustee capacity, made

the original decision to acquire the Properties. The Properties were

originally acquired as long-term Plan investments and were to be

developed and sold. However, the real estate market did not perform

well and the Properties did not generate any income for the Plan. In

this regard, it is represented that Property 1 has been vacant since it

was originally acquired by the Plan.

4. The Properties were appraised on May 23, 1994 (collectively; the

Appraisals) by Thomas M. Descano, ASA, an independent real estate

appraiser certified in the State of Pennsylvania (Mr. Descano). In

appraising Property 1, Mr. Descano relied primarily on the market

comparison approach as well as the cost approach, and determined that

the fair market value of Property 1 was $200,000. In appraising

Property 2, Mr. Descano determined that the fair market value was

$205,200. In the Appraisal of Property 2, Mr. Descano stated that the

local market did not provide any comparable sales of vacant land, and

as such he had to abstract land value from recent improved property

sales. Mr. Descano represented that this is done by estimating the

depreciated value of the improvements and then deducting that value

from the sale price, thereby arriving at the approximate value of the

land. On June 22, 1994, in a supplemental statement to the Appraisals,

Mr. Descano stated that the adjacency of Property 1 and Property 2 does

not merit a premium above the fair market value to Mr. Civera, the

purchaser of both Properties.

5. Mr. Civera proposes to purchase the Properties from the Plan in

a one-time cash transaction. The applicant states that the proposed

exemption would be in the best interest and protective of the Plan

because the transaction will divest the Plan of non-income producing

assets, provide the Plan with liquidity, and enable the Plan to

diversify its assets.3 The applicant also notes that the

transaction is protective of the Plan because as a result of the sale

the Plan will receive the current fair market value for each Property

established at the time of the sale by an independent qualified

appraiser.

\3\This exemption,if granted, extends relief from section

4975(c)(1)(D) and (E) of the Code, for the sale of the Properties by

the Plan to a disqualified person. However, no relief is provided

herein for any prohibited transaction which may have arisen as a

result of the Plan's acquisition and holding of the Properties.

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6. In summary, the applicant represents that the transaction

satisfies the statutory criteria of section 4975(c)(2) of the Code

because:

(a) the proposed sale will be a one-time cash transaction;

(b) the Plan will receive the current fair market value for each

Property established at the time of the sale by an independent

qualified appraiser;

(d) the sale will provide the Plan with liquidity; and

(e) Mr. Civera as the sole participant of the Plan will be the only

individual affected by the transaction.

Notice to Interested Persons

Because Mr. Civera is the sole participant of the Plan, it has been

determined that there is no need to distribute the notice of proposed

exemption to interested persons. Comments and requests for a hearing

are due 30 days from the date of publication of this notice in the

Federal Register.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department

at (202) 219-8883. (This is not a toll-free number.)

Jerome Companies Profit Sharing Plan and Trust (the Plan) Located

in Barron, Wisconsin; Proposed Exemption

[Application No. D-09829]

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption

is granted the restrictions of sections 406(a) and 406(b)(1) and (b)(2)

of the Act and the sanctions resulting from the application of section

4975 of the Code, by reason of section 4975(c)(1) (A) through (E) of

the Code shall not apply to the proposed cash sale (the Sale) of the

Guaranteed Investment Contract #62043 (the GIC) issued by Confederation

Life Insurance Company (Confederation), a Canadian insurance

corporation, by the Plan to Jerome Food, Inc. (the Employer), a

Wisconsin corporation, the sponsoring employer and a party in interest

with respect to the Plan; provided that (1) the Sale is a one-time

transaction for cash; (2) the Plan experiences no loss nor incurs any

expense from the Sale; and (3) the Plan receives as consideration from

the Sale the greater of either the fair market value of the GIC as

determined on the date of the Sale, or the principal amount of $500,000

plus simple interest accrued at the rate of 9.03 percent per annum on

the principal amount of the GIC for the period from January 25, 1994,

to the date of the Sale.

Summary of Facts and Representations

1. The Employer, located in Barron, Wisconsin, is an integrated

turkey distributor, which raises and slaughters turkeys, packages and

distributes whole turkeys, and processes and distributes specialty

turkey products, such as ground turkey and GobbleStix (a registered

trademark of the Employer). It is a closely held company which employs

approximately 2,400 employees.

2. The Plan is a defined contribution plan with individual accounts

for its participants that is intended to meet the qualification

requirements of sections 401(a) and 401(k) of the Code. The Plan

intends also to comply with the provisions of section 404(c) of the Act

whereby participants self-direct the investments of assets in their

respective individual accounts. As of December 31, 1993, the Plan had

approximately 1,466 participants and total assets of $17,822,946.

In 1990 when the Plan invested in the GIC, the Vice President of

Finance for the Employer selected various investment vehicles for the

participants of the Plan, subject to the approval of the trustee for

the Plan, Marquette Bank Minneapolis, N.A. (subsequently acquired by

First Trust, N.A.)4 All such investment decisions are now made by

a subcommittee composed of officers/employees of the Employer and are

subject to review and approval by the Corporate Executive Committee,

which consists of the President and 6 Vice Presidents of the Employer.

\4\The Department notes that decisions to acquire and hold the

GIC are governed by the fiduciary responsibility provisions of Part

4 of Title I of the Act. In this regard the Department is not

proposing relief for any violations of Part 4 which may have arisen

as a result of the acquisition and holding of the GIC.

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The independent trustee for the Plan is First Trust, N.A. (the

Trustee), a national banking association chartered by the Comptroller

of the Currency. The [[Page 488]] Trustee is a wholly-owned subsidiary

of First Bank System, Inc., a Delaware corporation headquartered in

Minneapolis, Minnesota.

3. Approximately 2.8 percent of the total assets in the Plan are

invested in the GIC which was acquired by the Plan on January 25, 1990,

for the principal amount of $500,000. Currently there are 327

participants who have their respective individual accounts holding

various proportional interests in the GIC.

The terms of the GIC guarantees the Plan a non-compounded 9.03

percent annual rate of return on its $500,000 investment until January

24, 1995, when the GIC expires and the principal amount is returned to

the Plan. Interest earned by the GIC is payable to the Plan each year

in January. All annual interest payments through January 24, 1994, have

been paid by Confederation, leaving only the interest that has accrued

since January 25, 1994, to be paid to the Plan. Under the terms of the

GIC, the Plan may not deposit additional amounts nor withdraw amounts

from its initial $500,000 investment.

4. Confederation, which is owned by its policyholders, has

operations in Canada, United States and Britain, and has been in

operation 123 years. In the United States, Confederation operates as

the Confederation Life Insurance and Annuity Company of Atlanta.

At the time the Plan acquired the GIC, Standard & Poor's ranked

Confederation as an ``AAA'' insurance company. Beginning in January

1992, Confederation ratings began to decrease as it suffered losses in

its commercial mortgage and real estate investments in the United

States and Canada. In April 1994, Confederation disclosed its net

losses for 1993 were $29 million in Canadian dollars. On August 11,

1994, the board of directors of Confederation voted to turn over

control of the Confederation to the Superintendent of Financial

Institutions for Canada. On August 12, 1994, the Michigan Insurance

Commissioner, through the Ingham County Circuit Court, Lansing,

Michigan, had Confederation's United States subsidiary placed in

conservatorship and rehabilitation to prevent the transfer of assets of

Confederation located in the United States. The action by the Michigan

Circuit Court suspended all payments on contracts of Confederation,

including the GIC. It is not known whether, when, or under what

circumstances Confederation will resume payments of interest pursuant

to the terms of the GIC or whether it will be permitted to make payment

of the principal upon maturity of the GIC.

5. In order to avoid the continued risk to the participants and

beneficiaries of the Plan from the investment in the GIC, the Employer

proposes to purchase the GIC from the Plan for cash in a one-time

transaction with no loss nor expense to the Plan.5 The Employer

intends to pay the Plan the greater of either the fair market value of

the GIC as determined on the date of the Sale, or the GIC's principal

amount of $500,000 plus simple interest accrued at the rate of 9.03

percent per annum on the principal amount for the period from January

25, 1994, to the date of the Sale. (January 25, 1994, was the last date

on which the Plan received its annual interest payment from

Confederation.)

\5\Section 3.04 of the GIC provides that the GIC may not be

assigned. The applicant is negotiating with Confederation to obtain

a waiver of this assignment restriction.

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In addition the applicant represents that considering the unstable

circumstances of Confederation and the uncertainty of reimbursing the

holders of the GIC, the proposed Sale will enable the Plan to recoup

its initial investment plus the accrued interest, and then invest the

proceeds of the Sale in more stable investments that will generate a

return to the Plan.

In a written statement the Trustee represented that in its capacity

of independent fiduciary of the Plan and based upon all the surrounding

facts and circumstances, including the status of Confederation, that

the proposed Sale is in the best interests of the Plan and its

participants and beneficiaries.

6. In summary, the applicant represents that the proposed

transaction will satisfy the criteria for an exemption under section

408(a) of the Act because (a) the Plan will receive from the Employer

in a one-time transaction cash in an amount that is not less than the

fair market value of the GIC, or an amount that is equal to the total

amount paid by the Plan for the GIC, plus earnings the GIC would have

received to the date of the Sale if Confederation had not been placed

under conservatorship and rehabilitation by the Circuit Court of

Michigan; (b) the transaction will enable the Plan and its participants

and beneficiaries to avoid any risk associated with the continued

holding of the GIC; (c) the Plan will not incur any loss or expense

from the proposed transaction; and (d) the Trustee of the Plan has

determined that the proposed transaction is in the best interests of

the Plan and its participants and beneficiaries.

FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

Iron Workers Pension Trust of Colorado (The Pension Plan); and Colorado

Iron Workers (Erection) Statewide Joint Apprenticeship and Trust Fund

(the Apprenticeship Plan; together, the Plans) Located in Denver,

Colorado; Proposed Exemption

[Application Nos. D-9690 and L-9691]

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption

is granted, the restrictions of section 406(a) of the Act and the

sanctions resulting from the application of section 4975 of the Code,

by reason of section 4975(c)(1)(A) through (D) of the Code, shall not

apply to the loan (the Loan) of $141,601.36 by the Pension Plan to the

Apprenticeship Plan, under the terms described in this notice of

proposed exemption, provided the following conditions are satisfied:

(a) the Loan represents less than 25% of the assets of the Pension

Plan; (b) the terms of the Loan are not less favorable to either Plan

than those obtainable in arm's-length transactions with unrelated

parties; (c) the trustees of each Plan approved the Loan as being

appropriate for, and in the best interest of each Plan; (d) no trustee

of either Plan made such determination on behalf of the other Plan; and

(e) the property securing the Loan (the Property) has been appraised by

a qualified, independent appraiser as having a fair market value in

excess of 150% of the principal amount of the Loan.

Effective Date: If the proposed exemption is granted, the exemption

will be effective August 11, 1992.

Summary of Facts and Representations

1. The Pension Plan is a defined benefit plan which provides

retirement benefits under a unit benefit formula. The Pension Plan is a

Taft-Hartley plan which is maintained pursuant to a collective

bargaining agreement between Local 24 of the International Association

of Bridge, Structural and Ornamental Iron Workers, AFL-CIO (the Union)

and the participating employers. The Pension Plan had 983 participants

as of March 31, 1991 and total assets of approximately $36 million as

of July 31, 1992.

2. The Apprenticeship Plan is an employee welfare benefit plan

which is [[Page 489]] also maintained pursuant to the collective

bargaining agreement between the Union and the participating employers.

The Apprenticeship Plan is designed to provide funding for programs to

recruit and train workers as iron workers and to provide continued and

advanced training for existing iron workers. The Apprenticeship Plan

had 554 participants and assets of $324,262 as of July 31, 1992. The

applicants represent that one employee of the Apprenticeship Plan is a

participant in the Pension Plan. Therefore, the Apprenticeship Plan is

a party in interest with respect to the Pension Plan.

3. On August 11, 1992, the Pension Plan made the Loan of

$141,601.36 to the Apprenticeship Plan. The Loan bears interest at a

rate of 9.25%, and calls for equal monthly payments of $1,457.35,

consisting of both principal and interest, amortized over a 15 year

period. A balloon payment is scheduled to be made by the Apprenticeship

Plan at the end of the fifth year, at which time the Loan will be

repaid in full. Spelman Baird & Warner, an independent mortgage banking

firm located in Denver, Colorado, has reviewed the terms of the Loan

and has represented that the terms of the Loan are reasonable and

comparable to loans between unrelated parties being made at the time

the Loan was entered into.

4. The Loan is secured by a first mortgage on the Property, which

is real estate located at 3385 Walnut Street, Denver, Colorado. The

Property is used by the Apprenticeship Plan to conduct the training and

apprenticeship programs offered by the Apprenticeship Plan. The

Property has been appraised by Curtis W. Wells, MAI, an independent

appraiser in Denver, Colorado, as having a fair market value of

$233,000 as of June 25, 1992. Thus, the collateral-to-loan ratio for

the Loan is approximately 165%.

5. The applicants represent that the Board of Trustees of each Plan

determined that the Loan was in the best interest of its respective

Plan. The applicants represent that there is one trustee who is common

to both Plans, but that trustee has and will continue to abstain from

all decisions involving the Loan. The applicants represent that none of

the other members of either Board of Trustees will be representing any

interests adverse to those of their respective Plans and will be acting

for the exclusive benefit of their respective Plans.

6. RMI Capital Management Co. (RMI) is a registered investment

adviser which is serving as an independent fiduciary for the Pension

Plan with respect to this transaction. RMI represents that at the

request of the Pension Plan, RMI investigated the possibility of the

Pension Plan making the Loan to the Apprenticeship Plan. RMI determined

that the Loan was a good investment opportunity for the following

reasons: (a) the Loan was adequately collateralized by the Property;

(b) RMI negotiated the terms of the Loan with the Apprenticeship Plan

and closed the transaction; (c) the rate of interest on the Loan is a

market rate of interest which is consistent with current market rates

being charged by other mortgage lenders; (d) RMI selected the appraiser

independently and verified the appraisal as reasonable; and (e) RMI did

an in-depth investigation of the Apprenticeship Plan's credit history

and determined that the Apprenticeship Plan was a good credit risk and

would have no difficulty meeting its obligations under the Loan.6

\6\On November 1, 1991, Rocky Mountain Investors, Inc. (now

known as RMI) entered into a Consent Order and Final Judgment (the

CO) with the Department and the United States District for the

District of Colorado in Martin v. Rocky Mountain Investors, Inc.,

et.al., Civil Action No. 91-S-1951 (D. Colo.). Pursuant to that CO,

RMI agreed to comply with all terms of an attached ``Rocky Mountain

Investors, Inc. Investment Policy and Underwriting Criteria'' (the

Guidelines) in carrying out its fiduciary responsibilities with

respect to employee benefit plans under the Act. The Guidelines were

incorporated by reference into the CO. RMI represents that it acted

in compliance with the Guidelines in approving the Loan on behalf of

the Pension Plan, and further that the Loan itself is in compliance

with the Guidelines.

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7. RMI represents that it is a partnership owned by JBGP

Corporation and Strategic Property Advisors, Inc. RMI is not owned or

controlled by either Plan, nor are any of RMI's employees participants

or employees of the Plans. RMI represents that with respect to this

transaction, it determined the facts surrounding the Loan, the

valuation of the Property and the structure of the Loan. RMI has also

monitored, and will continue to monitor the Loan on behalf of the

Pension Plan and take whatever action is necessary to enforce the

Pension Plan's rights under the Loan.

8. In summary, the applicants represent that the subject

transaction meets the criteria of section 408(a) of the Act because:

(a) the Loan represents approximately 0.39% of the assets of the

Pension Plan; (b) the Loan is at fair market rate terms not less

favorable to either Plan than those obtainable in an arm's-length

transaction with unrelated parties; (c) the Property securing the Loan

has been appraised by a qualified, independent appraiser as having a

fair market value approximately 1.65 times the principal amount of the

Loan; (d) the trustees of both Plans have determined that the Loan is

in the best interest of their respective Plans; (e) RMI, the Pension

Plan's independent fiduciary, determined that the transaction is

appropriate for, and in the best interest of, the Pension Plan, and (f)

RMI has monitored, and will continue to monitor the Loan and take

whatever action is necessary to enforce the Pension Plan's rights under

the Loan.

NOTICE TO INTERESTED PERSONS: Notice of the proposed exemption will be

provided by first class mail to all interested persons within 30 days

of the date of publication of the notice of pendency in the Federal

exemption and will inform interested persons of their right to comment

with respect to the proposed exemption. Comments to the Department are

due within 60 days of the date of publication of this notice of

proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

Employees' Savings Plan of Bassett-Walker, Inc. (the Plan) Located in

Martinsville, Virginia; Proposed Exemption

[Application No. D-09894]

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption

is granted the restrictions of sections 406(a) and 406 (b)(1) and

(b)(2) of the Act and the sanctions resulting from the application of

section 4975 of the Code, by reason of section 4975(c)(1) (A) through

(E) of the Code shall not apply to the proposed cash sale (the Sale) of

the Guaranteed Investment Contract No. 62012 (the GIC) issued by

Confederation Life Insurance Company of Atlanta, Georgia

(Confederation) by the Plan to VF Corporation, a Pennsylvania

corporation headquartered in Wyomissing, Pennsylvania, a party in

interest with respect to the Plan; provided that (1) the Sale is a one-

time transaction for cash; (2) the Plan experiences no loss nor incurs

any expense from the Sale; and (3) the Plan receives as consideration

from the Sale the greater of either the fair market value of the GIC as

determined on the date of the Sale, or $1.5 million, the principal

amount of the GIC, plus simple interest accrued at [[Page 490]] the

rate of 8.70 percent per annum on the principal amount of the GIC for

the period from April 4, 1994, to the date of the Sale.

Summary of Facts and Representations

1. The sponsoring employer of the Plan is Bassett-Walker, Inc., a

Virginia corporation headquartered in Martinsville, Virginia. It is

engaged primarily in the manufacturing and marketing of high-quality

fleece and printwear. Bassett-Walker, Inc. was incorporated on

September 24, 1984, and is wholly-owned by VF Corporation, the proposed

purchaser of the GIC.

VF Corporation, a Pennsylvania corporation headquartered in

Wyomissing, Pennsylvania, was incorporated on December 4, 1899, and has

its securities publicly traded on the New York and Pacific stock

exchanges. It is engaged primarily in the domestic and international

manufacturing and marketing of jeanswear, casual/sportswear, and

intimate and other types of apparel.

2. The Plan is a profit sharing plan that maintains individual

accounts for its participants and is intended to satisfy the

qualification requirements of sections 401(a) and 401(k) of the Code.

The net assets of the Plan were $27,158,367, as of December 31, 1993.

There are currently approximately 5,547 participants and beneficiaries

of the Plan.

The applicant represents that the Plan is administered by a

committee (the Committee) which is appointed by the sponsoring employer

pursuant to the terms of the Plan. The Committee has the discretionary

responsibility for the overall administration of the Plan, including

the appointment of legal counsel, accountants, and the trustee for the

Plan. The current members of the Committee are Carl Reynolds

(Chairman), Steven Fritz and Margaret Bouldin (Secretary), who are

employees of the sponsoring employer of the Plan, and Louis J. Fecile,

an officer of VF Corporation, the proposed purchaser of the GIC.

The applicant also represents that UMB Bank, N.A. (formerly known

as United Missouri Bank, N.A.) was appointed trustee (the Trustee), for

the Plan, effective February 2, 1993. The Trustee is located in Kansas

City, Missouri. It acts as custodian of the assets of the Plan, ensures

that the assets of the Plan are held in trust as required by the Act,

and oversees the establishment and maintenance of investment and

disbursement accounts of the Plan.

3. The GIC was acquired by the Plan, effective April 4, 1990,

pursuant to $1.5 million tendered by the Plan to Confederation on April

3, 1990.7 Under the terms of the GIC, simple interest was to be

paid by Confederation to the Plan at a guaranteed rate of interest in

the amount of 8.70 percent per annum through April 3, 1995. All annual

interest payments through April 3, 1994, have been paid by

Confederation, leaving only the interest yield that accrued since April

4, 1994, remaining to be paid to the Plan. Under the terms of the GIC,

the Plan may not deposit additional amounts to nor withdraw amounts

from its initial $1.5 million investment. As of August 31, 1994, the

GIC was valued at $1,514,315 and represented approximately 5.04 percent

of the total value of Plan assets.

\7\The Department notes that decisions to acquire and hold the

GIC are governed by the fiduciary responsibility provisions of Part

4 of Title I of the Act. In this regard the Department is not

proposing relief for any violations of Part 4 which may have arisen

as a result of the acquisition and holding of the GIC.

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On August 12, 1994, the Ingham County Circuit Court, Lansing,

Michigan placed Confederation in conservatorship and rehabilitation,

causing Confederation to suspend all payments on its contracts,

including the GIC. The applicant represents that it is not known

whether, when, or under what circumstances Confederation will resume

interest payments under the terms of the GIC or whether it will be

permitted to pay the principal amount of the GIC to the Plan upon the

maturity of the GIC.

4. In order to eliminate the risk associated with continued

investment in the GIC and to allow the Plan to distribute or otherwise

invest the assets of the Plan currently invested in the GIC in more

stable investments that produce a return to the Plan, VF Corporation

proposes to purchase the GIC from the Plan.8 The applicant

represents that the Sale would eliminate the risks inherent in the

continued investment in the GIC by the Plan and would be in the best

interests of the Plan and its participants and beneficiaries.

\8\Section 3.04 of the GIC provides that the GIC may not be

assigned. The applicant represents that it is negotiating with

Confederation to obtain a waiver of the assignment restriction.

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The Trustee in a letter dated November 10, 1994 also has

represented that the Sale as proposed is in the best interests of the

Plan and its participants and beneficiaries and that the proposed

transaction is protective of the rights of the Plan participants and

beneficiaries.

The applicant states that the Sale would be a one-time transaction

for cash and the Plan would not incur any expenses from the Sale nor

experience any loss. The applicant also states that the Plan would

receive as consideration for the Sale the greater of either the fair

market value of the GIC as determined by the Trustee on the date of the

Sale, or the amount of funds expended by the Plan in acquiring the

principal amount of the GIC plus any interest accrued and not paid on

the GIC until the date of the Sale.

5. In summary, the applicant represents that the proposed

transaction will satisfy the criteria for an exemption under section

408(a) of the Act because (a) the Plan will receive from the Sale in a

one-time transaction cash in amount that is not less than the fair

market value of the GIC as determined by the Trustee, or an amount that

is equal to the total amount paid by the Plan for the GIC plus earnings

the GIC would have paid to the date of the Sale if Confederation had

not been placed under conservatorship and rehabilitation by the Circuit

Court of Michigan; (b) the transaction will enable the Plan and its

participants and beneficiaries to eliminate any risk from continued

holding of the GIC and invest the funds from the transaction in more

stable and paying investments; (c) the Plan will not incur any loss nor

expense from the proposed transaction; and (d) the Trustee of the Plan

has determined that the proposed transaction is in the best interests

of the Plan and its participants and beneficiaries as well as

protective of the rights of the participants and beneficiaries.

FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

Employee Profit Sharing-Savings Plan and Trust Agreement of Modern

Globe, Inc. (the Plan) Located in Wyomissing, Pennsylvania; Proposed

Exemption

[Application No. D-09893]